D CEO ⋅ October 2012

“If he talked to you, he’d have to talk to everybody,” West said. “That’s something he doesn’t want to do.” illustration by Jim Salvati

Ray C. Davis: The Undercover Billionaire

He’s made a fortune in the energy business and co-owns the Texas Rangers baseball club. But he flies notoriously under the radar. We set out to track down the mysterious mogul and try to learn why.

By Thomas KorosecFrom D CEO October 2012“If he talked to you, he’d have to talk to everybody,” West said. “That’s something he doesn’t want to do.” illustration by Jim Salvati

The second-floor courtroom in Fort Worth’s Depression-era Eldon B. Mahon U.S. Courthouse made a suitable backdrop for the high-dollar auction sale of the Texas Rangers.

Marble floors, rich oak paneling, and Art Deco-detailing gave the place a sumptuous feel. And the 21-foot ceiling was just tall enough to contain the egos of all the pricy lawyers in attendance, not to mention the men who were prepared to write the half-a-billion-dollar-or-more check it would take to buy the MLB team.

Mark Cuban, owner of the NBA’s Dallas Mavericks, swapped greetings with reporters as he and Houston businessman Jim Crane, his bidding partner, took their seats at one of the courtroom tables. “Going over some last-minute figures?” one reporter asked Cuban, who was a bit tardy. Cuban shot a look as if the guy were crazy, waving off the idea that he might be worried about something so trifling.

The August 4, 2010, auction turned out to be a grinding affair, punctuated by long pauses in the bidding. As a reporter covering the story for a national business news outlet, I used the intermissions to pad around and try to get some of the key players to comment on behind-the-scenes developments.

During one break, I approached a man who had stayed completely in the background, but who nonetheless was a central participant in the Rangers sale saga. Dressed nattily in a blue-gray pinstripe suit, white shirt, and violet tie, Ray C. Davis stood several inches taller than the Rangers’ six-feet-two-inch Nolan Ryan, with whom he had arrived.

I introduced myself to the rangy Davis, who retired as a billionaire from Dallas-based Energy Transfer Partners, a publicly traded pipeline company where he’d served as co-CEO. He gave my hand a firm grip, said hello in a deep voice and then, before I could get my first question out, nodded and walked away.

The non-interview was not only disappointing from a professional standpoint; it was so brief I hadn’t formed the slightest impression of Davis. Was he shy, or someone who loathes the media, or nothing of either?

My interest in Davis hardly abated when, 10 hours after the auction began, the group led by Ryan and attorney Chuck Greenberg won the American League club with a bid worth $593 million. Davis and another billionaire, Bob Simpson, co-founder and former CEO of XTO Energy Inc., reportedly provided the bulk of the purchase price and, once the sale closed, became co-chairmen of the team’s board of directors.

News reports over the next few hours, including mine, ran with quotes from Cuban and Ryan and a memorable one from Greenberg, who conceded that while the auction price was “a little expensive … it’s all part of the color and pageantry of the affair.”

Nowhere, though, was there a quote from Davis, who’d picked up a big part of the sale tab and then slipped out of the courthouse without a word.

Owners of professional sports teams in most cities, but especially in Dallas, play a unique role in the fans’ views of their beloved teams. Here, Cuban and Jerry Jones of the Dallas Cowboy get endlessly analyzed. For every “Top Ten Shortstops of All Time” list, there are five titled “Ten Worst Owners of All Time.” Fans need someone to blame when teams sink in the standings, and ownership is a favorite place to start.

So, it’s fair to ask, who is this billionaire pipeline businessman and co-owner of the Texas Rangers? And, why does he maintain such a low profile?

Active InvestorIn the two years since the auction sale, the 70-year-old Davis has rarely broken his silence, though it’s clear that he is far from a passive investor in the club. Refusing all interview requests, including three I’ve made myself over that span, Davis has positioned himself as the anti-Mark Cuban. He’s not only invisible in terms of the team, but he declines to say much about his business dealings either. He is, simply put, the last investor on the planet you’re going to see showing off his business savvy on TV’s Shark Tank—where Cuban stars—or anywhere else.

What we do know, though, is that Davis is still active at his investment company, Avatar Investments LP, which has offices on Sherry Lane in Dallas. So it was with great interest that I learned that he was to speak this spring to the Dallas-Fort Worth chapters of the Association of Certified Fraud Examiners at the group’s annual conference.

Ray Davis, left, showed up at a 2011 news conference with Nolan Ryan to talk about the resignation of Texas Rangers CEO Chuck Greenberg.
photography courtesy of the Fort-Worth Star Telegram

It was like hearing someone had spotted a woodpecker that was thought to have gone extinct.

The fraud examiners group, which was good enough to let me attend the private presentation, said Davis would be talking about “his experience on avoiding and finding investment swindles.” That sounded promising, I thought as I drove to the meeting at Dallas’s Cityplace Conference and Event Center.

But first, it turned out, Davis wanted to talk about baseball. “Anybody who feels tired after a nice lunch can go to sleep. That’s just fine,” the businessman deadpanned, warming up as the luncheon speaker at the late-May event. He was dressed in standard business attire: tie, gray suit, white shirt. “My wife said she falls asleep after 15 minutes of me talking. Here’s a little about the business of baseball . . .”Baseball is like a lot of other businesses, Davis told the group. “We’re no better than the players on the field, and no better than the scouting and development and people in the office.

“There are no shortcuts in this business,” he said. “People have tried to buy championships before without success. You win with people, you build from within, and you try to keep as much payroll flexibility as you possibly can.”

Then, referring to issues facing the team in the current season, he declared, “This year is going to be extremely difficult. . . . We have some real challenges coming up, trying to make the decisions we’re going to have to make on all our free agents, seeing who we can sign, and what young players we have coming up who can fill the need.”

Once Davis had finished his talk—later, he would also address non-Rangers business issues—I intercepted the normally reticent billionaire on his way off the stage, only to have my request for an interview rebuffed again. “I don’t do interviews,” he said tersely.

Persevering, I said it appeared that he had quite a lot to do with the team.

“It’s a business. It’s not an ego thing. It’s a business,” Davis allowed. He agreed with Bob Simpson’s view, given at a news conference last year, that Ryan and General Manager Jon Daniels were running the team day-to-day, and that the co-chairmen were acting more as “wise counselors” with experience to offer.

Only twice has Davis been seen in the public eye on Rangers business. He accompanied then-team CEO Chuck Greenberg to Little Rock, Ark., on a trip to woo free agent Cliff Lee in late 2010—a trip that failed to land the pitching ace. Four months later he appeared with Ryan and Simpson at a news conference announcing that Greenberg had resigned—a move widely reported as an ouster.Davis, who shed no light at the news conference on the reasons for Greenberg’s leaving, told the assembled sportswriters, “Neither Bob [Simpson] or I expect ever to do another press conference.”

So far, he’s lived up to his pledge.

A Lifesaver“That’s just Ray,” Charlie Waters, the former Dallas Cowboys star safety, said when I asked him to explain Davis’ low profile.

Waters, who was hired at Energy Transfer Partners in 1996 by Davis and the company’s current chairman, Kelcy Warren, said, “He put some fire back into me, he and Kelcy, when they gave me that job. They saved my life.” Waters had been despondent over the death of his teenage son, he explained.

Waters joined Energy Transfer when it employed about a dozen people; today there are more than 5,000 employees. He said that Davis is extremely sharp with details, while Warren is more of a gambler. “Ray will make the tough decision if that’s right for the business long-term,” Waters said. “He has a sensitive side to him, but in business he can tune that out in a second.”

The company’s first emphasis was electricity trading in newly deregulated markets, Waters said. Davis and Warren had sold Cornerstone Natural Gas Inc., consisting of about 700 miles of pipelines and processing facilities in East Texas and Louisiana, to El Paso Energy Corp. for $115 million in 1996. A non-compete clause kept them out of the pipeline business for a time. But by the early 2000s they were back expanding in a world they knew well.

In August 2002, industry publication Gas Daily reported that “Davis and Warren are well on their way to repeating the formula they used in the 1990s to build a regional midstream powerhouse.” The next year the company announced it was building its own large pipeline to handle natural gas from Texas’ burgeoning Bossier Sand and Barnett Shale fields, according to Natural Gas Week.

Bruce Bullock, director at the Maguire Energy Institute at SMU’s Cox School of Business, said that pipelines are one of the few industries permitted by the federal tax code to be organized into master limited partnerships like Energy Transfer Partners. MLPs, he said, avoid corporate taxation and distribute profits directly to their so-called unit holders.

The steady income pipelines generate, combined with investor demand in a low-yield era, have made MLPs very attractive investments. Energy Transfer units have returned more than 19 percent per year to their investors over the last decade, according to Morningstar data.In 2007, when Davis announced he was retiring from the company at age 65, Energy Transfer had a whopping enterprise value of $20 billion. Within a year and a half, Davis made his first appearance on the Forbes 400 list of the richest Americans, debuting at No. 367 with an even $1 billion. Forbes appears to have had no more luck than any other news outlet in charming Davis with their attentions. His name appeared for several years without a photo and, on this year’s list—where he’s ranked No. 312, with $1.5 billion—the publication describes him as “reclusive.”

Davis said he’s still busy at the company as a director. But much of his time is spent with Avatar, his personal investment company. “We were Avatar before there was Avatar,” he said, referring to the movie during my brief encounter. Among the companies he discussed acquiring were “a metal roofing company in California” and “a pipeline company in Ohio.”

During his talk to the fraud conference, Davis did nothing to fulfill the promise that he’d discuss the swindles or near-swindles he’s experienced. He plays his cards too close to the vest for that. He did, however, pass along in general how he goes about his due diligence as a frequent purchaser of companies and assets.

“I think it’s great that we have Sarbanes-Oxley and all the other controls we put on companies,” he told the May gathering. “But I would suggest to you [that] all the controls in the world are not going to prevent fraud in the short term. In the long term they’re all going to get caught, but in the short term you have to go back to the integrity of the people who are putting the numbers together.”

In studying companies, Davis went on, acquirers “don’t spend enough time in my view on the people, two levels of management.”

Of course it’s important to analyze the numbers, he said. “But, how much time do you spend on the people you are about turn the keys over to? I’m not saying you should challenge their integrity. It’s more like Ronald Reagan said: `Trust and verify.’ Verify their résumés and their academic records, what their competitors say about their management and their reputation, credit checks, criminal background, litigation. The point is, who are the difference-makers who set the policies in this company and who dictate its culture?”

Smiling, Davis added, “I have been burned more than once, and my checklist is many pages. I don’t share it because I want my competitors to get burned and not me.”

After he finished speaking, Davis joined Waters in handing out several scholarships for college students on behalf of Community Trust Bank. Waters is on the board of Louisiana-based Community Trust, a private bank in which Davis is a stockholder and which does a lot of business with Davis and the Rangers. The scholarships were given in honor of “Happy Davis,” whom Waters described to the group as Davis’ father.

It turns out the name Happy Davis has been connected with a lot of philanthropic giving over the last four years, though no one seems to have connected it to Ray Davis’ fortune. Federal tax records show Davis formed the Happy Davis Foundation in 2008 with an initial $1.5 million contribution, then added $7 million over the next two years, the latest for which records are available.

He’s given $1 million to the George W. Bush Presidential Library and Museum in Dallas, for example; $1 million to the Buckner Foundation, a Christian charity based in Dallas; and $1 million to International Justice Mission, a Christian-oriented, human-rights agency in Washington, D.C., that aims to rescue victims of slavery and other forms of violent oppression.

Public records—such as those Davis uses to vet the management of his acquisition targets—also show that Davis and his wife, Linda, bought the White Pine/Double Heart Ranch near Gunnison, Colo., for $18 million in 2007, the year he retired from Energy Transfer Partners. The spread comprises 8,500 acres, plus 45,000 acres of leased public land, with a 10,000-square-foot lodge, according to a former listing with Ranch Marketing Associates.

After owning a succession of increasingly stately homes in Dallas, Davis moved after his retirement to a ranch in Denison, a placid rolling property with an unmarked gate and a newly built, 5,686-square-foot main house valued on the Grayson County tax rolls at $2.2 million. That doesn’t include more than a half-dozen separate parcels of ranchland on the tax rolls in the Denison area.

But what of his personal history, his educational credentials? News stories about Davis are almost non-existent. And those who know him well are instinctively defensive and protective. “In school I think he might have played football as an offensive lineman. When we talk about football, he likes to talk about offensive line play,” said Waters, who could not name Davis’ schools. “I think he grew up in East Texas, maybe Longview. You’d better ask his assistant.”

Good suggestion. So I called Keli West, whose cellphone number someone at Avatar Investments offered up freely. I told West I had a few simple questions about Davis’ hometown, his schools, and his family history. She said she would put my request to her boss. A day later she emailed to say, in effect, “No dice.”

“If he talked to you, he’d have to talk to everybody,” West said. “That’s something he doesn’t want to do.”

And if he doesn’t want to do it, he won’t do it. So, should the Rangers sink from the top of their division, or let go of your favorite star, you’ll have to find someone else to explain what happened. Almost certainly, Ray C. Davis will not be taking your calls.